How an IPO Works, From the S-1 Filing to the First Trade
An initial public offering follows a set sequence of filings and steps. This guide walks through each one, using Figma's 2025 listing as a worked example.
An IPO (initial public offering) is the first sale of a company’s shares to the public, registered with the SEC on Form S-1. The company files the S-1, often confidentially at first, answers SEC staff comments, sets a price range, markets the deal on a roadshow, prices the shares the night before trading, and then lists on an exchange such as the NYSE or Nasdaq.
Each step leaves a document on SEC EDGAR, so the whole process can be followed in public filings. The example used below is Figma, which priced its IPO on the New York Stock Exchange in July 2025.
What are the steps of an IPO, in order?
The sequence is the same for most US IPOs; only the time between steps varies.
- Draft registration statement (DRS). The company submits a draft S-1 for nonpublic SEC review. The SEC staff opened this option to companies of any size in 2017 and widened it in March 2025.
- SEC comments. SEC staff send comment letters, and the company answers and revises the draft, sometimes several times.
- Public S-1. The company must file publicly, including all earlier drafts, at least 15 days before the roadshow starts, under the staff’s draft registration statement FAQs.
- Price range. An amended S-1 (S-1/A) adds the expected price range and share count. This preliminary prospectus is the document investors see during marketing.
- Roadshow. Executives and bankers present to institutional investors, who give “indications of interest”: how many shares they would buy at what price.
- Effectiveness and pricing. The SEC declares the registration statement effective, and the company and underwriters set the final price, usually after the market closes.
- Allocation. The underwriters decide which investors get shares and how many.
- Final prospectus. The company files a 424B4 (or 424B3) prospectus with the final price.
- First trade. The stock opens on the exchange, usually the next morning.
- Closing. Shares are delivered and the company receives the money; US trades settle one business day after the trade date.
What did these steps look like in a real IPO?
Figma’s final prospectus, dated July 30, 2025 and filed as a 424B4 on SEC EDGAR, shows the numbers a reader can pull from any IPO.
| Item | Figma, July 2025 |
|---|---|
| IPO price | $33.00 per Class A share |
| New shares sold by the company | 12,472,657 |
| Existing shares sold by stockholders | 24,464,423 |
| Underwriters’ over-allotment option | Up to 5,540,561 more shares, for 30 days |
| Estimated net proceeds to the company | About $383.4 million |
| Lead underwriters | Morgan Stanley and Goldman Sachs |
| Expected share delivery | On or about August 1, 2025 |
The split between new and existing shares matters. Money from new shares goes to the company. Money from shares sold by existing holders goes to those holders, which the prospectus states in its “Use of Proceeds” section.
How is the IPO price set?
The underwriters recommend a price based on the indications of interest gathered during the roadshow, and the company makes the final decision, according to the SEC’s investor bulletin Investing in an IPO.
The price can land inside, above or below the range in the preliminary prospectus, and the number of shares can change too. The SEC bulletin notes that the company wants a high price to raise more money, while the underwriters also want a price their investor clients find attractive, and that underpricing creates a discount for the first buyers. The final price and share count appear in the 424B prospectus and in the company’s pricing press release.
What is the greenshoe option?
The greenshoe, formally the over-allotment option, lets the underwriters buy extra shares at the IPO price (minus their discount) for a short period after the offering. It is used to support trading in the first weeks: underwriters can sell more shares than the base deal and then cover that position either by buying in the market or by exercising the option.
In Figma’s case the option covered up to 5,540,561 shares for 30 days, all from selling stockholders, about 15% of the 36,937,080 base shares. The company received no money from the option shares, the prospectus states.
Who gets shares at the IPO price?
Most IPO shares go to the underwriters’ institutional and high-net-worth clients, such as mutual funds, hedge funds and pension funds, the SEC bulletin says. Individual investors can buy at the IPO price only if their broker is part of the underwriting group and gives them an allocation.
The more common route for individuals is buying once the stock starts trading, at whatever price the market sets. The opening price comes from matching buy and sell orders on the exchange and can be far from the IPO price in either direction. The SEC bulletin also notes that underwriters may limit future allocations for clients who resell IPO shares quickly (“flipping”).
Early holders and employees usually cannot sell right away; their restrictions are covered in our guide to the IPO lockup period.
Are there other ways to go public?
Yes. A direct listing puts existing shares on an exchange without a traditional underwritten offering, and a SPAC merger takes a private company public by combining with a listed shell company. Our guides compare a direct listing vs an IPO and explain how a SPAC works.
Bottom line
SEC comment letters exchanged during an IPO review are posted on EDGAR, but not until at least 20 business days after the registration statement becomes effective, so they are a later source for what the SEC questioned. Before the IPO, the best documents are the latest S-1/A and, after pricing, the 424B4.
FAQ
How long does an IPO take?
There is no fixed timeline. The SEC review and comment process can take months, and the roadshow and pricing happen in the last weeks before trading.
What is the difference between the S-1 and the 424B4?
The S-1 is the registration statement, amended as S-1/A during review, with a price range. The 424B4 is the final prospectus filed after pricing, with the actual price and share count.
Does the company get money when its stock rises on the first day?
No. The company receives the IPO price for the new shares it sold, minus underwriting discounts. Trading gains and losses after that belong to whoever buys and sells in the market.
Where can I read an IPO prospectus?
Search the company on SEC EDGAR and look for S-1, S-1/A and 424B filings. The prospectus is also linked from the company’s investor relations site once it is public.
